The Government said that it will reduce outgo on subsides from 2.6 percent of GDP in 2011-12 to 1.5 percent by the end of 12th Five Year Plan (2012-17) through various reforms. The Government has also said that pre-determined limits would be set for subsidies. The expenditures on subsidies during the 11th Plan (2007-12) increased by 207 percent from around Rs 70,926 crore to Rs 2,17,941 crore in 2011-12.
Government feels that the high outgo on subsidies hurts the inclusive growth and it should be contained within pre-determined limits. With this move, the government will also achieve its fiscal deficit targets. The Finance Ministry has pegged the overall fiscal deficit in 2013-14 at 4.8 percent lower than the estimated 5.2 percent of GDP in current financial year.
Further, the government has said that reducing subsidies will not hurt the poor as some subsidies under the proposed Food Security Act will be pre-determined and others such as on fertilisers can be redesigned to serve their purpose at less cost. Subsidies on petroleum products which are untargeted and do not benefit the poor would need to be reduced. The government has made a provision of Rs 2, 31,084 crore on account of subsidy outgo in the Budget for 2013-14.
